Governor with European agenda

Villeroy de Galhau can shake up Paris and Berlin

by Denis MacShane

Thu 12 Nov 2015

François Villeroy de Galhau, the new governor of the Banque de France, has perhaps been checking the porcelain in his gilded offices near the Louvre. He is part of the Villeroy & Boch dynasty that produces some of Europe’s best-known high-quality plates and table services.

The firm is run by the German Boch side of the family: an apt reminder. France has more firms in the Fortune 500 – 31 compared with 29 in Germany and 27 in the UK. Yet the successful German medium-sized Mittelstand companies like Villeroy & Boch substantially outnumber those in France.

These details emerge from Villeroy de Galhau’s revealing book, L’espérance d’un Européen, which demonstrates what we can expect from the new arrival, who will have a role not just in Paris but also in the upper echelons of the European Central Bank, the Bank for International Settlements and the International Monetary Fund.

The new governor, 56, who took over from Christian Noyer on 1 November, is a man with an agenda. He can use his time atop one of the world’s most prestigious central banks as a platform to urge France to pay less attention to celebrating revolutions and other past glories, and instead embrace reforms.

He will be an ally of Mario Draghi, the ECB president. And he will surely find ways to prise the Finanzministerium Ordoliberals in Berlin out of their policy bunkers. German decision-makers must act to get more capital flowing through Europe’s economic veins, as Hans Eichel, a former German finance minister, proposed on 29 September at an OMFIF meeting in London.

To be sure, no euro bloc national bank any longer has traditional monetary powers. But Villeroy de Galhau brings impressive leverage to the ECB governing council.

The governor grew up in Strasbourg, as much part of his German as French family. He commands both languages fluently. Indeed, he calls for the emergence of Homo politicus europeus: a political elite who should speak at least two or three European languages, one of course English. Villeroy de Galhau meets these criteria, a product of the high technocratic training that produces brilliant French administrators for a state where real economic performance never quite seems to match lofty political ambition.

Villeroy de Galhau served in the inner team of Pierre Bérégovoy, the socialist French prime minister. He was chief of staff of Dominique Strauss-Kahn when he was socialist finance minister in the government of Lionel Jospin in the late 1990s.

Villeroy de Galhau speaks well of both men’s abilities, but these two political masters leave no very decorous legacy. Bérégovoy shot himself in 1993, shortly after being voted out of office. Strauss-Kahn ended his political life in 2011 after a scandal over an alleged sex attack when he was managing director of the International Monetary Fund.

Villeroy de Galhau moved into the private sector to become a senior executive at BNP Paribas including a stint at its Italian subsidiary, Banco Nazionale de Lavoro. He added Italian to his linguistic portfolio and came to know and admire Draghi as governor of the Banca d’Italia.

Politically he is defined by the centrist-left French concept of ‘social-liberal’. He glides easily through Europe’s political and banking cultures. He believes firmly that France needs to slim its bureaucracy, contrasting 38 ministers in Paris with 16 in Berlin. He records how French municipal chieftains visiting Germany are shocked at the modest offices of their German counterparts.

Villeroy de Galhau draws lessons, too, from the willingness of Gerhard Schröder, German chancellor in the early 2000s, to impose painful labour market reforms, sparking a second German Wirtschaftswunder. Contrast this, he says, with then President Nicolas Sarkozy’s rejection of detailed reform proposals put forward by a commission chaired by French technocrat Jacques Attali, on which Villeroy de Galhau served.

Villeroy de Galhau will shine on the international central banking circuit. But his main challenge lies in Paris. Reform momentum ahead of the April-May 2017 French elections is low. If France does not soon raise its economic game, it will lose all hope of equal partnership with Germany in shaping the euro area and Europe.

Denis MacShane, a former UK Europe minister, is a member of the OMFIF advisory board and author of Brexit: How Britain Will Leave Europe (IB Tauris). Villeroy de Galhau’s L’espérance d’un Européen is published by Odile Jacob.